IMPORTANT NOTICE

The pandemic has basically severed the flow of non-essential goods and services, stalling parts of the economy.

As restrictions are slowly lifted in stages, businesses need to ensure consistent cash flow while they get back to business as usual. Let us help you manage your cash flow while you get your business running smoothly once again.

The bad debts of 2011 about to get a lot worse

EVERYTHING is relative and it says much about the sheer scale of current levels of bad debt that the spectacular judgments of not so long ago now seem like mere footnotes in monetary terms.

Back in 2007, a solicitor named Michael Lynn had a judgment registered against him of just over €1.7m, which ranked among the top 10 judgments of that year. He also absconded to Portugal.

While the debtors of 2011 lack Mr Lynn's badness, they still have the capacity to take the breath away.

Towering over them all is Sean Quinn with two judgments totalling in excess of €2bn in favour of the Irish Bank Resolution Corporation.

The chart of judgment debt values suggests two conclusions.

First, the jump in value between 2009 and 2010 is staggering (true). Second, that the jump between 2010 and 2011 is smaller and that this means the worst is over (false).

In fact, we are still at a relatively early stage in the process of washing out bad debt from the system.

Take 2010: that year was notable for the judgments secured against the Cork property quartet of Michael Conway Snr, Michael Conway Jnr, Kieran Conway and Paudie Dennehy. Their joint and several liabilities of over a billion euro -- or around €236m apiece -- inflated that year's total, otherwise the total for 2010 would have been at least €600m less.

But it is 2011 that really bears scrutiny as this is the year when NAMA registered its first judgments of note -- relatively late in the year -- in its pursuit of the Grehan brothers and Jim Mansfield.

This is the start of a second wave of judgments on a massive scale. When it comes to predicting the trajectory for future years, all roads lead to NAMA and the evidence is that we will have to recalibrate the scale on the chart to take account of the deluge of NAMA-related bad debt that is approaching like a tsunami.

NAMA purchased loans with an original book value of €77bn, at a 40pc discount, for €54bn. We now know that €46.2bn of the original loans are non-performing.

NAMA has only registered six judgments so far in its existence: expect that number to rocket in the next 12 months.

At 'Stubbs Gazette', we predict that at least €20bn of non-performing NAMA loans will wind up in the courts over the next three to five years.

So, at least €4bn-€7bn in NAMA-related judgments alone will be baseline to yearly figures before a single other judgment from any bank or other creditor is counted.

Given the economic prospects for the country -- which now look increasingly bleak following the third quarter contraction of 2011 -- the NAMA baseline will be supplemented by record levels of debt default elsewhere. The net result will be off the chart.

Of course, property is the consistent theme throughout the past few years as far as judgments are concerned.

This is not immediately apparent from analysis of the occupations of the debtors, but it can be taken that the descriptions "gentleman" and "businessman" contain many such speculators -- professional and amateur -- whose investments collapsed around them.

One notable feature of the occupational analysis is the extraordinary low rate of judgments attributable to public servants (just 0.39pc in 2011).

Given that public servants comprise some 30pc of the workforce, this indicates that the level of judgments in this sector is running at 1pc of what it should be (although it can be taken that some public servants are included in the "gentleman" category).

But perhaps the biggest story behind the numbers is the sheer carelessness of creditors.

The Conways-plus-Dennehy of Cork story tells its own extraordinary tale. Here were three banks -- Ulster, Bank of Ireland and Anglo -- all of which lent sums ranging from €38m to €135m, but none of which appeared to cross-check this particular group's exposure.

Even worse was the Lynn case. Here was a man whose track record in default would have been well known to any person who bothered to check.

The extraordinary fact is that Mr Lynn was by no means alone in his ability to get credit despite his unsuitability. We expect many more such examples over the next few years.